David B. Barlow, SCRP, GMS, is the senior vice president of Client Support services for SIRVA Relocation and SIRVA’s senior consultant. In 2000 David joined SIRVA Inc., the world’s largest relocation management and moving services company, after retiring with over 33 years of human resources assignments, including global relocation, with Chevron Corp. in San Francisco. David has held many key HR positions including compensation, benefits design, and job evaluation, and has led numerous HR staffs. David has completed a three-year term on the Board of Directors of ERC and seven years on ERC’s Public Policy Committee.
David is a Senior Certified Relocation Professional (SCRP) and holds the Global Mobility Specialist title. David also holds a bachelor’s degree in economics and an MBA from the University of Utah.
Now may be a good time to reflect on the fact that the “bursting of the housing bubble,"which impacted many parts of the United States, was preceded by record setting increases in home prices. While most of the country has seen two year price decreases, some areas like Las Vegas (down 37%), Phoenix (down 39%) and Miami (down 38%) stand out as being especially hard hit. Some experts are now saying that it may take decades for home prices to recover and that we should expect price growth to revert to more post World War II “historical norms." By historical norms we mean that housing prices are much more likely to rise consistent with income levels and inflation. This reality has not been lost on the real estate speculator (now driven out of the market) but what does this mean for corporate relocation transferees? Transferees need to be counseled through the home sale process to ensure that they are basing their decision-making process on current market conditions. For example:
- The new home is less likely to appreciate during their years of occupancy
- They should not only buy a home they can afford, but one that they will live in until their next transfer
- Transferees should choose a home that will suit their long-term needs, as the ability to leverage home appreciation to “buy up” is far more difficult
For more information about counseling your transferees through the the corporate relocation home sale process, please contact SIRVA.
The current real estate market continues to drive home values down significantly, frequently resulting in sellers being unable to sell their homes for more than the original purchase price. This situation adds financial strain on transferees and leads to loss-on-sale, namely the difference between what a home sells for in relation to the price at which it was purchased.
Today, companies are taking measures to assist transferees by modifying their loss-on-sale programs to reflect the continuing deterioration in the housing markets. If companies currently do not have a loss-on-sale program in place, they are working to add these elements into their policies in order to help protect transferees from significant home value loss.
In this month's Policy Matters, SIRVA provides an inside look at the following aspects of designing and implementing a successful loss-on-sale program:
Evaluate New Programs: Before implementing a loss-on-sale program, companies should always perform necessary due diligence on which program benefits should be offered, keeping consistent with a company's financial situation and industry best practices.
Re-evaluate Existing Programs: For companies that already have a loss-on-sale program in place, now is a good time to re-evaluate current program benefits to ensure overall effectiveness in today's real estate market.
Identify Other Contributing Factors: In this down real estate market, transferees could potentially be not only in a loss-on-sale situation but also subject to negative equity, which would need to be addressed before the home sale can proceed.
Read the complete article now.
Here at SIRVA our clients are increasingly asking how the continuous economic turmoil impacts their company insofar as their relocation program is concerned. Specifically, they want to know how their company can continue to effectively and efficiently hire new employees and relocate existing employees during these difficult times.
So what should companies do in such challenging times insofar as relocation is concerned? In addition to learning how to better leverage relocation policies currently in place, this is the optimal time for companies to look at some of the innovative and time-tested relocation program provisions that are proving highly effective at protecting both your company and your employees. Here are some suggestions:
Best Practices for Home Sale: Making sure your relocation program includes four (4) critical home sale provisions—regardless of what type of home sale program you have—and how to effectively enforce expectations.
Loss On Sale and Negative Equity: An inside look at the innovative new options for the company and the transferee in these two complicated, yet frequently encountered, situations.
Pre-Decision Analysis: Before the formal relocation process is started, companies need to assess whether candidates are able to actually complete the relocation in today’s economic climate.
Read the complete article now
Relocation policies often differ on the information covered in the introduction portion of the policy before specific relocation features and benefits are discussed. Most policies begin with a positive welcome and mention some of the rules that qualify the move as a relocation—such as initiation by the company and meeting the IRS’s 50 mile test. But occasionally, we see policies that have left out important points which should be mentioned.
First of all, good policies state the “exception to policy” rules up front. Including this verbiage clearly establishes the fact that the policy does not anticipate exceptions. The policy should also state that acceptance of the relocation does not guarantee or imply in any way a continuation of employment or an employment contract.
Additionally, the policy needs to clarify that the transferee is expected to move within a reasonable, normal and customary commutable distance from the new work location. This is necessary as the IRS 50 mile test does not require the transferee to move directionally to the new work location—only that that the difference between the new work location and the old residence be 50 miles greater than the difference between the old work location and the old residence. This means that without clarifying policy language, the transferee could move anywhere and meet the 50 mile test.
While it is difficult to cover every potential situation in a relocation policy, setting the rules in the policy is far more preferable than attempting to explain—after the fact—why the policy did not address the issue.
Historically, relocation program managers have required transferees to submit receipts for most relocation expenses. This requires the transferee to gather, account for and then submit receipts. Someone then has to review and then approve/deny the numerous relocation expenses incurred during the relocation process. Because this is a very labor intensive process (i.e. reviewing receipts), the practice of providing transferees with a set lump sum for certain corporate relocation expenses has grown in popularity. Lump sums first began with the introduction of the Miscellaneous Expense Allowance (MEA), which set forth the idea of providing one lump sum amount to cover small miscellaneous expenses. The use of lump sums was then expanded to pay for food expenses (per diems), based on a fixed daily amount, and then lump sums were set for specific relocation features—such as the home finding trip. In this example, the home finding lump sum would be sensitized per transferee by using the number of trips and total days allowed in the policy, as well as the cost of the destination location.
Today’s tough real estate market has led to an increase in policy exception requests—primarily in the area of temporary housing. Most policies have been designed to offer specific benefits (i.e. home finding, temporary living, etc.), but now—given the state of the real estate market—more and more companies have begun grouping specific taxable benefits into one managed lump sum. A current best practice approach is to take the trio of home finding, temporary living and miscellaneous expense benefits and combine them into one managed lump sum amount—allowing the transferee to choose how they wish to spend this money, versus a “one-size-fits-all” approach. By having a managed lump sum program, exceptions decrease since transferees are empowered to spend their lump sum on the expenses which are a priority to them. And lastly, companies can share in the savings, as lump sums often cost less than providing relocation reimbursements individually.
If you are interested in incorporating managed lump sums into your relocation program or need more information, you can e-mail me at
david.barlow@sirva.com .
For more information about managed lump sums, please review our
white paper.
A recording of The Fundamentals of Relocation Webinar session is now available. This session will provide a brief history of the industry, and a broad overview of the relocation process, including a review of the terms and concepts most common to relocation policy development and implementation. The discussion will include household goods and temporary living options, the home sale process based on IRS Revenue Rulings, and industry trends such as lump-sum benefits and high-cost area assistance.
View the Webinar
fundamentals of relocation webinar
Thursday, May 22, 2008
1:00 p.m. EST (10:00 a.m. PT)
Speaker: David Barlow, SCRP, GMS, Senior Vice President, Client Support Services, SIRVA
Duration: One hour
This "relocation 101" webinar is designed for new relocation professionals, procurement managers and supply chain managers who would like an overview of relocation fundamentals, and for anyone who wants to stay current with the latest policy trends and best practices.
This session will provide a brief history of the industry, and a broad overview of the relocation process, including a review of the terms and concepts most common to relocation policy development and implementation. The discussion will include household goods and temporary living options, the home sale process based on IRS Revenue Rulings, and industry trends such as lump-sum benefits and high-cost area assistance.
Register at https://van.webex.com/van/j.php?ED=91994767&RG=1
Details for joining the session will be included in the registration confirmation e-mail
The continued difficult housing market creates cases where some homeowner employees find themselves in personal financial situations that are not conducive to accepting a relocation. Previously, “family considerations” were often the most common reason for an employee to delay or reject a corporate relocation. In today’s housing market, however, the problem is sometimes a home cannot be sold for an amount sufficient to cover the outstanding loan(s).
While more than half of companies have a loss-on-sale program in their corporate relocation policies, these programs correctly treat (through a wide variety of formulae) the difference between the purchase price of the home and the selling price. Where employees have taken out second mortgages and/or lines of credit, however, they may in fact be “upside down”--namely owing more on their home than it is worth. In these situations, companies are wise in not making up “negative equity.” Negative equity is often the result of financial and purchasing decisions, which were made in times when real estate was appreciating. The negative equity, however, has no bearing on the actual loss-on-sale.
Today it is critical that the BMA/BPO process—which determines the MPSP (Most Probable Sales Price)--quickly identify cases where an employee may be “upside down.” Once an employee’s “home health” is known, all parties (employee, company and relocation service provider) can assay whether the relocation should proceed, or if the best course of action is to consider an alternative candidate. Making this judgment early before corporate relocation commitments and expenditures are made is a prudent course of action.
This March SIRVA University, SIRVA Relocation’s annual conference exploring corporate relocation industry trends and professional development, played host to 150 of the nation’s top relocation industry executives. The event, which was held at the Westin Kierland Resort in Scottsdale, Ariz., provided an exclusive forum for industry insiders to discuss vital, ongoing and emerging relocation industry issues with experts and colleagues.
Attendees included representatives from human resources, domestic relocation, global mobility, and procurement and supply chain departments from more than 75 different companies.
This year, conference roundtables and educational sessions covered topics ranging from promoting corporate relocation programs, home loss-on-sale assistance, developing employee relocation packages for global mobility and relocation trends in China. Additional sessions addressed relocation fundamentals, such as policy trends and best practices, and provided a comprehensive history of the industry—on both a domestic and global scale.
SIRVA University Presentations Available Online
Those who were unable to attend this year’s event can download SIRVA University presentations and event images at www.sirvauniversity.com/agenda.asp. Individuals can also download audio recordings of the various sessions to hear them as they were presented, including question-and-answer sessions. Individuals seeking more information on SIRVA University 2008 can e-mail sirvau@sirva.com.
Thankfully long gone are the “olden days” when employees were told “your paycheck will be in Wichita, so be there next week.” However, the state of residential real estate markets does appear to have raised the likelihood that employees are more reluctant to move and there are some very good reasons why they have every right to feel as they do.
Consider the employee who took a transfer two years ago and followed all the company rules in the purchase of his/her home—in short they did not overpay for the property. Now two years later the home is worth less than the employee paid for it and the company says we want to move you again. Who should eat the loss on that home—the transferee or the company? The transferee has every right to look to the company to cover that loss on the sale of his/her property in whole or in part and, if they do not, no one should be surprised if the employee says, “no thanks, I’ll wait until the market recovers.”
Home Sale Loss Programs, while admittedly costly are clearly a legitimate and needed relocation benefit in today’s real estate market.
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